Other Author Kismet Johnson, Legal Consultant
The European Commission has finally published its eagerly awaited Proposal for a Directive on substantiation and communication of explicit environmental claims1 (‘the Green Claims Proposal’). As its name suggests, the Proposal was crafted with a view to putting an end to non-mandatory consumer-facing claims of environmental benefit that bear no relation to reality (so-called ‘greenwashing’).
This article analyses what it might entail for businesses that make environmental claims intended for the EU market. Once the Proposal enters into force, explicit environmental claims will have to undergo self-assessment and certification prior to appearing on the market. Environmental Labels will also require Commission or Member State pre-approval. That in itself may create a climate that deters businesses from engaging in what is likely to become a very difficult, heavily regulated area. The Green Claims Proposal should be read in conjunction with other Commission proposals, such as the Proposal on ecodesign for sustainable products and the Proposal on consumer empowerment which each bring their own restrictions. Until all of these Proposals have entered into force numerous uncertainties remain as to application of the future legal framework in practice..
The overall context
Published on the 22 March 2023, the Green Claims Proposal is one part of a two-part legislative package entitled ‘Consumer protection: enabling sustainable choices and ending greenwashing’. The other part purports to establish a series of ‘common rules promoting the repair of goods’2.
This latest package follows up on the Sustainable Products’ package published in March 2023, which included a Proposal for a Regulation on ecodesign for sustainable products (‘EPR’) and a Proposal for a Directive on Consumer Empowerment (‘CED’). The CED amends the Unfair Consumer Practices Directive (‘UCPD’)3 which establishes the principle that consumer-facing claims should not be misleading to the average consumer (lex generalis). The CED introduced ‘environmental impact’ as one of the product features in relation to which the average consumer can be misled.
The Proposal on Green Claims should be read in the context of the UCPD framework. The UCPD Guidance document4 provides that ‘vague and general statements of environmental benefits’ cannot be made without ‘appropriate substantiation’. The Green Claims Proposal provides rules for substantiating claims that a product presents an environmental benefit (lex specialis). In the event of a conflict between the UCPD and requirements established by the Proposal, the latter should normally prevail5.
Scope of the proposal: from all environmental claims to explicit environmental claims
The aim of the Proposal is to provide a harmonised set of rules for businesses wishing to make ‘explicit environmental claims’. Article 2(2) defines an ‘explicit environmental claim’ as ‘an environmental claim that is in textual form or contained in an environmental label’.
The unofficial version of the Green Claims Proposal in circulation a few weeks ago targeted all environmental claims without establishing any distinction. The definition of environmental claim that it used and that has remained the same in the final Proposal is extremely broad6. By choosing to focus on ‘explicit’ claims, the European Commission decided to limit the scope of the Proposal to claims that require some intent and articulation, i.e. text-based claims or claims involving visuals yet structured within the context of a label7. This shift is welcome. Including suggestive environmental claims exclusively based on colours or graphics would have injected tremendous legal uncertainty into everyday marketing decisions.
For example, it is unclear whether the colour green would still have been fit for use in marketing materials, without prior substantiation. Could it not be interpreted as constituting an implied claim that a given product, line of products or brand is good for the environment? Yet how does one substantiate a colour? Which nuances of ‘green’ would be concerned? The same could be said for anything bearing foliage, fruit or animals, to name just a few. Furthermore, demanding the substantiation of implied environmental claims could possibly have led to the absurd situation where one could have argued that the act of participating in a fundraising event, for example, constitutes an environmental claim requiring substantiation.
Substantiation rules: from standard methodology to assessment
Article 3 provides that Member States should ensure that claim substantiation should be based on ‘an assessment’. The assessment should establish certain items, such as whether the claim covers the whole or only part of the product and whether the product performs better than the common practice8 for like products. It must be able to demonstrate that the environmental impact at the source of the claim is ‘significant’.
The European Union has seemingly decided to postpone enshrining its Product Environmental Footprint methodology (‘PEF’) as the standard methodology for substantiation. As stated in the Explanatory Memorandum, PEF is not deemed ready to be applied to all products across all categories. Articulating the whole substantiation scheme around the PEF for all products would have entailed significant gaps in information or modelling options for many products, meaning claims pertaining to those products would have necessarily been imprecise, thereby defeating the purpose of the initiative.
Furthermore, PEF does not cover many of the performance aspects which businesses like to highlight, such as durability, repairability etc. The one-methodology approach would have meant that businesses would have had to drop perfectly sound claims that cater to issues that might legitimately tilt consumers’ purchasing decisions in their favour.
Article 3(4) does, however, empower the Commission to adopt delegated acts to specify more detailed assessment rules for particular product categories – including life-cycle assessment rules – where regular monitoring reveals that the framework currently envisaged leads to ‘obstacles for the functioning of the internal market’ or ‘widespread misleading of consumers’. Recital 31 specifies that, in practice, the Commission could act even before monitoring results are forthcoming. This paves the way for the gradual development of at least partially PEF-based rules which could supplant the ‘basic’ Article 3(1) assessment.
Stringent and restrictive rules on Environmental labels
Article 2(2) targets claims ‘contained in’ an environmental label. Article 2(8) defines ‘environmental label’ as ‘a sustainability label9 covering only or predominantly environmental aspects of a product, a process or a trader’. As a reminder, the Proposed CED would ban the use of sustainability labels that are not based on a certification scheme or set up by a public authority. In addition to self-assessment and certification applicable to all explicit environmental claims, the Green Claims Proposal foresees other specific rules applicable only to environmental labelling schemes.
Indeed, pursuant to Article 8.3 of the Proposal, environmental labelling schemes will have to be ‘established under Union law’. Therefore from the date of its entry into force, public authorities will no longer be able to establish new national or regional environmental labelling schemes. National or regional schemes set up prior to the entry into force of the Proposal – in the EU and in third countries – will still be able to award labels to participants, but only provided the schemes meet the requirements set out in the Proposal. And environmental labels set up by private operators, or public authorities in third countries, after the entry into force of the Proposal will be subject to pre-approval10 and must present an ‘added value’ compared to EU or regional equivalents.
It would seem, from the Proposal on Green Claims’ silence on the matter, that privately-operated environmental labelling schemes set up prior to the entry into force of the Green Claims Proposal would still be able to operate without having to meet the requirements set out therein. That is, unless they use a scoring system. Indeed, pursuant to Article 7.2, all schemes featuring an ‘aggregated indicator’, ie. a scoring system – will have to be ‘established under Union law’, irrespective of their date of establishment.
Established under Union law’ isn’t defined in the Proposal. However, Recital 41 does provide a loose definition of ‘Union rules’, stating that ‘explicit environmental claims, including environmental labels, based on an aggregated score representing a cumulative environmental impact of products or traders should not be deemed to be sufficiently substantiated, unless those aggregated scores stem from Union rules, including the delegated acts that the Commission is empowered to adopt under this Directive, resulting in Union-wide harmonised schemes for all products or per specific product group based on a single methodology’. As a result of the above, ‘established under Union law’ most likely means, at least partially, established via delegated act pursuant to Article 3.4.
Article 3.4 (c) empowers the Commission to supplement requirements for the substantiation of claims by ‘establishing specific life-cycle-based rules on substantiation of explicit environmental claims for certain product groups and sectors’, also known as Product Environmental Footprint Category Rules (PEFCR). PEFCR are product-group or sector specific methodological rules for applying PEF. In practice, businesses who wish to rely on or establish a life-cycle-based scoring system in the future might have to gather by Industry and participate in the drafting of industry-specific PEFCRs in conjunction with the European Commission11.
Article 7.4 of the Proposed ESPR should also be borne in mind in this context, as it empowers the Commission to adopt product-specific classes of performance via delegated act. A product’s class of performance is how well the product rates on a given product parameter – for example, durability - as compared to other products. Annex I of the ESPR contains a list of product parameter, including a product’s environmental footprint. Classes of performance that seek to indicate how well a product performs in terms of its environmental footprint will necessarily involve the determination of a footprinting methodology and an ‘aggregated indicator’, i.e. a score. One would imagine that here the Commission would resort to PEF and develop PEFCRs, thereby overlapping with the area covered by the Green Claims Proposal. It is, as of yet, unclear to what extent Industry could be involved in framing the classes of performance methodologies should they be developed outside the PEFCR framework.
New requirements for Comparative claims
Comparative claims are currently regulated under the comparative advertising directive12. Article 4 foresees specific additional requirements applicable to comparative environmental claims, namely that data, data sourcing and assumptions used to establish the comparison between two products or businesses should be equivalent on both sides of the equation, and all significant value-chain stages and environmental impacts should be taken into account. Furthermore, where a comparison is being made with a product that is no longer on the market, the claim should highlight the baseline year for comparison and how the improvement at the heart of the claim has had an impact on other environmental aspects that are relevant for that product category.
Specific rules for Communicating claims
Article 5 establishes rules for communicating environmental claims. Some of the standout rules include provisions on use phase and future performance. Indeed, where use phase is the among the most relevant life-cycle stages of a product, there shall be a duty to provide consumers with information on how to use the product to achieve the environmental performance highlighted in the claim. Moreover, there will be duty to include time-bound value-chain commitments where the claim pertains to future environmental performance.
External Verification and certification of claims
Article 10 of the Proposal provides that Member States should set up procedures for the verification of the substantiation of explicit environmental claims, as well as the verification of compliance of environmental labelling schemes with the specific rules applicable thereto.
Verification is to be carried out by a verifier, defined as a third-party conformity assessment body accredited for the purpose of verifying compliance with the Proposal. The verifier delivers one certificate of conformity per claim. The European Commission estimates the cost of a certificate of conformity pertaining to a simple claim at €500. The cost increases with the level of complexity of the claim.
Although in the Explanatory Memorandum the European Commission indicates that businesses will bear the cost of claim substantiation, Article 10 mandates Member States to ensure conformity assessment bodies are accredited which one imagines must entail some expenditure.
Two things should be borne in mind. First, environmental labelling schemes made by private operators or public authorities in third countries will also have to go through a pre-approval process, as specified above. Other than the ‘added value’ condition that must be satisfied, it is unclear at this stage how this pre-approval process will differ from the verification carried out by the conformity assessment body. Nor is it clear why the European Commission feels it – or Member States – are best placed to carry it out.
Second, although the Proposal on Green Claims is silent on the topic, one would hope Member States will operate on the basis of intracommunity mutual recognition for labels established outside their respective jurisdictions, as long as they have undergone verification and/or approval pursuant to the new law.
Whether – Commission or Member State – pre-approval actually adds anything to the kind of verification that can be carried out by a conformity assessment body is moot. In practice, it is highly likely that conformity assessment bodies would be in charge of both.
And for businesses who thought that a certificate of conformity would foolproof their claim against consumer challenges: think again. Recital 52 states: ‘[t]he certificate of conformity should however not prejudge the assessment of the environmental claim by the public authorities or courts which enforce [the UCPD]’.
Article 1 excludes a series of environmental claims regulated by existing or future Union rules setting out more specific legislation, such as the EU Ecolabel Regulation13, the Regulation on energy labelling14, the Directive on ecodesign for energy-related products15, the batteries Directive16, the Directive on packaging and packaging waste17, and the Regulation on the certification of carbon removals18, to name just a few. Finally, microenterprises are not required to self-assess or certify. But if they choose to do so, they will be held to the standards set out in the Proposal.
The Green Claims Proposal deviates from previous versions, notably by removing the previously contemplated ban on claims on products containing substances classified for several endpoints of concern. This is a very welcome change since many products containing classified substances would have simply not have been able to bear any sort of environmental claims or labels, as a result. This would have been the case even if the hazards presented by such substances were not only acceptable from a safety or regulatory point of view, but also may have had no connection with any sort of environmental impact.
Another change worth noting is the move from a methodology to an assessment, which seems more flexible. At this stage, however, and until all pending Proposals have been finalised, uncertainties remain as to the extent to which the future legal framework will be coherent and workable. Yet, once one starts delving into the detail of the provisions, and particularly how they interact with each other, how they overlap with rules set out elsewhere19, not to mention several hints in the Recitals as to the direction the European Commission wishes to go20, one grasps the global picture, which is that when it comes to environmental claims, almost nothing may be claimed without some sort of prior authorisation or third-party oversight. That in itself may create a climate that is not prompt for businesses to engage in what is likely to become a very difficult, heavily regulated area.
2 COM (2023) 155 final dated 22nd March 2023 | Proposal for a Directive of the European Parliament and of the Council on common rules promoting the repair of goods and amending Regulation (EU) 2017/2394, Directives (EU) 2019/771 and (EU) 2020/1828
4 Guidance on the interpretation and application of Directive 2005/29/EC of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market
6 Article 2.1 of the Proposal borrows the definition from Article 2(o) of the CED, namely ‘any message or representation, which is not mandatory under Union law or national law, including text, pictorial, graphic or symbolic representation, in any form, including labels, brand names, company names or product names, in the context of a commercial communication, which states or implies that a product or trader has a positive or no impact on the environment or is less damaging to the environment than other products or traders, respectively, or has improved their impact over time’.
7 Visuals in a label are to be distinguished from visual effects that feature independently from a label and that are purely based on colours, graphics, etc. These would not be within the scope of the Proposal. They should nevertheless still comply with the general rules on fairness, etc. set in the UCPD.
8 No definition is ventured. Recital 18 states that ‘common practice’ entails minimum legal requirements in some cases. However, in cases where the majority of products perform better than the legal minimum, then the latter cannot constitute common practice.
9 Article 2(7) borrows the definition from Article 2(r) of the CED, namely ‘any voluntary trust mark, quality mark or equivalent, either public or private, that aims to set apart and promote a product, a process or a business with reference to its environmental or social aspects or both. This does not cover any mandatory label required in accordance with Union or national law’.
10 Commission approval for labels from public authorities in third countries; Member State approval for labels established by private operators whether in the Union in third countries. These labelling schemes will also have to comply with the Article 10 certification requirement.
11 Recital 32 specifies that PEFCRs should not be adopted for a given product category until all impact categories that are relevant for that product group or sector have been integrated into the methodology. It makes special reference to textiles, explaining that until microplastics release has been factored into the methodology, no PEFCR for textiles can be adopted.
20 Recital 67 and 68 clearly reiterate the Commission’s view on the gradual phasing out of substances of concern to prevent ‘harm to the environment’ and pave the way for further legislation restricting claims on products containing them.